Tata Motors in the last few years has made a strong comeback in the Indian passenger vehicle market with its range of stunningly stylish products. Be it the sales numbers, be it Impact 2.0 design language or the stylish new-age modern passenger vehicles – the homegrown automaker has remained in headlines.
Of all manufacturers in the Indian car industry, one OEM that is consistently making great strides in terms of sales, ably aided by their new platforms, designs and models, is Tata Motors. Tata Motors has already sold more cars in the first 7 months of 2021 than all the cars they sold in 2020. A feat accomplished only by Nissan and Jeep (on very low volumes) other than the Tata Motors.
The below chart shows average monthly sales from 2015 till July 2021. It calculates the Cumulative Annual Growth Rate or CAGR as is popularly known and ranks Tata Motors at No 3 at a whopping 38% CAGR and ranks No 1 if we take away new entrants like MG and KIA who have had a very small time period of operation to show.
- Grand Total taken out, as the heat map is relevant between competing brands.
- All CAGR values arrived based on average monthly sales numbers as 2021 is not a full year.
- Monthly sales are calculated based on the number of months a model was sold in a year. If the model started selling in March of a year, then the average monthly sales is calculated as total sales that year divided by 10 and not 12. For 2021 the divisor has been 7 as we have only the first 7 months of data.
The below chart shows the average monthly sales across different form factors and segments clearly illustrates the segments that are growing at a scorching pace.
- Above data is for the entire car industry other than luxury brands like Mercedes-Benz and BMW.
- Electric SUV CAGR not brought into the heat map because Nexon does not disclose its EV sales and hence it is not accurate.
- Grand total not accounted for in the heatmap.
In the rank of performance, the top 5 segments are
- The 4-meter SUVs/crossovers with a whopping 51% CAGR – examples are Tata Nexon, Kia Sonet, Hyundai Venue and Maruti Suzuki Vitara Brezza. Today 1 in 5 cars sold in India is a 4-meter SUV/crossover.
- Mid-sized SUVs with a CAGR of 18% – examples are the Hyundai Creta and the Kia Seltos.
- Large SUVs with a CAGR of 16% – example the Tata Safari and the Tata Harrier.
- 4-meter hatches, mid-sized MUVs and large and premium SUVs all of which are growing at a CAGR of 9%.
- Notable mention is the sub-4-meter MUVs like the Renault Triber which though in smaller volumes has put up a commendable performance.
Knowing the above, how does Tata’s portfolio of cars look like and how have they managed their portfolio over the last 6 years or so.
We see that in the above chart they have stuck to the knitting judiciously by moving away from sedans and medium hatches both of which are today showing negative growth to the much more juicy segments of the 4-meter SUV with their Nexon, the 4-meter-hatch segment with the much acclaimed Altroz, the brilliant large SUV segment with their JLR platform based harrier and Safari and the mini Hatch segment with the Tiago.
The below charts tell us about their individual products, the markets and their market share in those respective segments look like. Their growth for most of their product lines has been brilliant except the Tiago and Tigor which have shown stagnation or even degrowth over time. Given that the form factor segments in which these 2 products fall, themselves are showing negligible growth, this is an understandable situation.
Tata Motors is slated to dethrone Hyundai Motors from their 2nd ranking perch in the coming 2-3 years if things continue the way they are.
At the same time, we also see that the 3 products that are catapulting Tata Motors into the big league are the Harrier and Safari which have shown stupendous volume growth of 58% in the last couple of years, the Nexon with the addition of an EV soaring away at 25% CAGR and the Altroz which has shown brilliant performance with a growth of 30%. Except for Nexon and Tiago, the other products are growing above the segment growth rates and this is where the promise lies. With the Altroz slated to be released in an EV avatar soon, we can only expect more growth and sales over here in the time to come.
Grand total not accounted for in the heatmap
Using the framework of the Boston Consultancy Group (BCG) and analyzing products by plotting their individual market shares in their respective segments against the growth of these segments, we see that the Nexon, the Safari+Harrier and the Altroz clearly show up as stars for the company.
Tata Tiago with a good 22% market share is proving to be a cash cow in a segment that is showing clear signs of stagnation.
Tata Tiago with a good 22% market share is proving to be a cash cow in a segment that is showing clear signs of stagnation. The Tigor is the product of serious concern where the market for the 4-meter sedan is shrinking at 8% and the market share of the product is also a low 8%. In BCG terminology such a product would be called a dog
The changed product portfolio of Tata Motors has ensured that their overall ranking and market share has improved dramatically off late. They are India’s 3rd largest producer of cars today and have come up all the way from rank 9 just 6 years ago.
The below chart also shows the trend line for Tata Motors over the last 6 years. It’s astounding that Tata Motors has increased its market share from 1% in 2015 to 10% in 2021!
What lies in the future?
With a volume growth of 38% compounded, Tata Motors is slated to dethrone Hyundai Motors from their 2nd ranking perch in the coming 2-3 years if things continue the way they are.
This would be aided by the below factors:
- Consumer preferencesare moving towards EVs. If Tata Motors successfully productionizes the EV batteries at their Tata Chemicals plant as is planned currently,it will give them major cost advantageshelping them reduce costs on their EV range of cars. The first mover advantage in EVs will hold the group in great stead.
- The 5-star NCAP ratings has helped greatly in building a brand reputationfor safety in the market.
- The design of the cars has been a major draw and one of the greatest competencies the company has acquired in the recent past other than the outstanding ride quality across their entire range of cars.
The dampeners could be the below factors:
- Tata Motors’ lack presence in the very lucrative mid-sized SUV segment which is growing at 18% CAGR and where Hyundai and Kia rule the roost. The challenge here is to have truly powerful engines and brilliant gear boxes, the technology for both of which are missing currently with the Tata Motors’.
- They have lost key talent like Pratap Bose to Mahindra recently. He is credited for the brilliant designs of the Nexon, the Altroz, the Harrier and the Safari. All blockbuster models from Tata Motors.
- The overall market is moving away from the sub 10 lakh price band to the 10-15 lakh and even the 15-20 lakh price bands. (See: The changing contours of the Indian car markets this decade). Tata Motors currently has no presence in the 15-20 lakh price bracket other than the lower end trims of the Harrier. They need to work overtime to plug these gaps.
- Though the Nexon is a hit product for Tata Motors, the volumes growth of 25% is half that of the segment growth of 51%. One of the contributing factors for this has been the lack of class leading engines and auto gear boxes as explained in point 1 above. The pickup in EV volumes however may offset this disadvantage and bring in much need momentum. The top players here are the Korean twins of Hyundai and Kia who together control close to a third of this segment thanks to their class leading engines and auto gear boxes.
- All the data are wholesales numbers, not retail numbers.
- All classifications of cars have been given by Cargraphical Analytics
- All data is up to July 2021.
(Niranjan N Prabhu is an auto industry analyst with vast experience in BI and data analytics for over 22 years.)
(Disclaimer: The views expressed in the article above are those of the author’s and do not necessarily represent or reflect the views of Autofintechs.com. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.)